Elmdale Enterprises is deciding whether to expand its production facilities. Although long-term cash flows are difficult to estimate, management has projected the following cash flows for the first two years (in millions of dollars):

1	Year	1	2
2	Revenues	124.2		168.6
3	Operating Expenses (other than depreciation)	37.9		69.6
4	Depreciation	29.6		42.5
5	Increase in Net Working Capital	2.5		7.9
6	Capital Expenditures	32.7		37.6
7	Marginal Corporate Tax Rate	30	%	30	%

.

a. What are the incremental earnings for this project for years 1 and 2?

(Note: Assume any incremental cost of goods sold is included as part of operating expenses.)

b. What are the free cash flows for this project for years 1 and 2?

a. What are the incremental earnings for this project for years 1 and 2?

(Note: Assume any incremental cost of goods sold is included as part of operating expenses.)

Calculate the incremental earnings of this project below:(Round to one decimal place.)

Incremental Earnings Forecast (millions)		Year 1		Year 2
Sales	$		$
Operating Expenses
Depreciation
EBIT	$		$
Income Tax at 30%
Unlevered Net Income	$		$